This is a post I did on my Facebook junior mining forum (Aussie Mining Shares -feel free to join if you have an FB profile) on PTS yesterday.
Cdchi1
For me currently its a close call between Platsearch (PTS) and Eromanga Hydrocarbons (ERH). In the end PTS wins out because of its 'safety net' being its WPG holding. Having said that, given my 'risky profile' I have a bigger exposure to ERH through the listed options.
So why PTS?
3 reasons:
1. Western Plains (WPG) holding owned by PTS
2. Joint venture approach
3. Iron ore and/or investment spinoff potential
I'll go through each of these.
1. Western Plains (WPG) holding owned by PTS
PTS owns around 10% of WPG...further, it has a heap of options exerciseable at 25c and 35c. At today's WPG closing price of $1.84, my calcs put PTS's holding (after deducting exercise cost of WPG options) at around a whopping $18.4 million.
Given PTS mkt cap at today's closing price of 27c is a mere $25.5 million, and that there is plenty of upside in WPG (Shaws have a conservative valn of $2.80+ ), this alone makes WPG worth taking a serious look at.
2. Joint venture approach
PTS has been around for many MANY years and it has really not changed its core approach. Basically it picks up very early exploratory ground, does the early groundwork (the cheap stuff), and then JVs the projects to other parties (big and small). The other parties undertake the more cost intensive exploration (drilling etc) while PTS remain free carried with a JV interest usually around 20-30%.
Interestingly, with the current boom and exploration properties being very competitive, PTS has been able to extend these arrangement to include not only a JV interest but shares in the company to which the project is being JVed. Chesser Resrouces is one example (which interestingly enough has been flying as well - PTS has 500G shares and 2 mill oppies in CHZ).
Also due to the current boom, there has been a massive increase the in the money spent by exploration partners...last year over $4 million was spent...this is almost 3 times the largest amount previously spent in former years.
What does the mean? Basically it means that PTS will always have a tight capital structure...look how long its been around yet it still has LESS than 100 million shares on issue. It also means that PTS has exposure to massive upside without the cost of the exploration rish which is of course high.
3. Iron ore and/or investment spinoff potential
More recently, PTS has annoucned its intention to do testwork on low grade iron ore properties in NSW. If favourable, PTS will shelve this project into Eastern Iron (a company it has incorporated) and will likely list it on the ASX. PTS shareholder should get priority but more importantly, PTS will likely retain a large interest in Eastern Iron. Givent he 'iron ore' boom, any such IPO is likely to be very successful.
PTS also mentioned recently that it has incorporated a new company called Bluestone 23...this is likely to house future PTS investments in the mining sector...for example, shares issued as per the JV approach i talked about above. Not sure why they are doing this...but i would expect it could also be a likely spin off one day.
The changes above suggest PTS is a very different animal than it has been over the last 30+ years...one broker told me he would not touch PTS as they did not have a commercial bone in their body however when i described the new stuff above, he was impressed by the change.
So PTS could be one to look out for, particularly if WPG continues its march northward...however the real upside is from the JVs...it just needs one big kahuna to be found.
As my broker describes their management: 'The best Australian exploration team never to find anything".
PTS Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
